Tesla Shareholders Greenlight Elon Musk’s Trillion-Dollar Pay Package

Tesla shareholders have voted in favor of a controversial pay package for CEO Elon Musk, potentially positioning him to become the world’s first trillionaire. On March 15, 2024, more than 75% of shareholders approved the plan during the annual meeting in Austin, Texas. If Musk meets specific performance targets over the next decade, he could receive stock valued at up to $1 trillion (£760 billion).

The vote followed extensive discussions regarding Musk’s management style and the justification for such an unprecedented compensation structure. This decision drew mixed reactions from various stakeholders, including small investors, pension funds, and prominent public figures.

Musk expressed his appreciation for the support following the vote, stating, “Fantastic group of shareholders,” and encouraging investors to “Hang on to your Tesla stock.” Despite this resounding approval, the backdrop of Tesla’s declining sales and market challenges raises questions about the company’s future and Musk’s leadership.

Performance benchmarks set by Tesla’s board are ambitious. Musk must enhance the company’s market valuation to nearly six times its current level, deliver 20 million Tesla electric vehicles over the next decade, and roll out 1 million humanoid robots, referred to by Musk as his “robot army.” These targets reflect the growing competition in the electric vehicle market and the need for innovation to maintain Tesla’s edge.

Recent sales data highlights the challenges ahead for Tesla. A report revealed a significant decline in car sales across Europe, with a staggering 50% drop in Germany in the previous month alone. Despite these setbacks, many investors still view Musk as a transformative figure who has previously guided Tesla from the brink of bankruptcy to one of the most valuable companies in the world.

Musk’s potential ascent to trillionaire status would surpass the historical wealth of John D. Rockefeller, who is estimated to have had a net worth of $630 billion in today’s dollars at his peak more than a century ago. Currently, Musk’s wealth is estimated at $493 billion, according to Forbes.

The approval of Musk’s compensation package faced opposition from influential entities, including CalPERS, the largest public pension fund in the United States, and Norway’s sovereign wealth fund. Both Institutional Shareholder Services and Glass Lewis, corporate governance advisors, criticized the proposal, suggesting that it could incentivize excessive risk-taking. Musk responded to the criticism by labeling these organizations as “corporate terrorists” at a recent investor meeting.

Critics argue that Musk’s already substantial wealth should negate the need for such a lucrative incentive. Sam Abuelsamid, an analyst at Telemetry, stated, “He has hundreds of billions of dollars already in the company, and to say that he won’t stay without a trillion is ridiculous. It’s absurd that shareholders think he is worth this much.”

Conversely, supporters contend that Musk’s leadership is crucial as Tesla navigates a transformative phase, integrating artificial intelligence and autonomous driving technologies. Dan Ives, a financial analyst at Wedbush Securities, commented, “This AI chapter needs one person to lead it and that’s Musk. It’s a huge win for shareholders.”

As Musk embarks on this ambitious endeavor, the coming years will reveal whether his vision and leadership can meet the high expectations set by both shareholders and the broader market.